Pakistan is a high risk country because of its unstable security situation. However, due to the country’s vast population, there is significant potential for a sizeable market for consumer-orientated businesses as the purchasing power of individuals improves. Pakistan's close geopolitical ties with China should also ensure that it benefits from China's rise, through growing trade and investment.
We keep our clients informed of the latest market moves and political developments in Pakistan, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 16 of Pakistan’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you one step ahead, so you can operate with confidence in Pakistan.
Pakistan Country Risk
A sharp drop in terrorist activity in 2015 is beginning to have positive effects on the Pakistani economy, following Islamabad's aggressive approach against terrorists based in the North Waziristan border region that were stepped up following the Peshawar military school attacks in December 2014. While significant challenges remain, a promising change in tack by the establishment may be in the offing, with the potential to provide more medium-term stability.
We forecast real GDP growth to come in at 4.3% in Fiscal Year 2015/16 and 4.2% in Fiscal Year 2016/17, helped by cheaper energy prices and an improved security situation. Pakistan's chronically low savings rate is finally beginning to increase, which will provide support for sustainable investment over the coming years.
The inflation cycle in Pakistan has...
Pakistan Operational Risk Coverage (9)
Pakistan Operational Risk
Pakistan Operational Risk
BMI View: Pakistan is a regional and global underperformer on the BMI Operational Risk Index and investors are faced with a multitude of risks in the country. Transport and utilities infrastructure is ageing and there are frequent interruptions to both supply chains and power supplies. Pakistan is also at risk of a severe water shortage which could impact upon a range of industries. Although one of the most populous countries in the world, investors are presented with a restricted labour pool due to the very poor educational standards in the country and also face high labour taxes. Corruption is another significant risk, affecting all levels of the government and judicial system, and Pakistan is also at high risk of terrorist attacks. These factors result in an overall score of 38...
Pakistan Crime & Security
Pakistan Crime & Security
BMI View: Severe and pervasive security risks pose a significant deterrent to investment in Pakistan. Despite a strong and politically influential military, the absence of the state is a problem in many regions, allowing criminal and terrorist activity to flourish and pose multiple security threats to businesses. The most pertinent risks stem from the potential for terrorist attacks, which may target foreign workers and businesses, and frequently occur throughout the country. Sectarian violence and communal strife further adds to the climate of insecurity, while criminal organisations are the main source of a range of illicit activities which affect legitimate businesses, including extortion, kidnapping, armed robbery, money laundering, production of counterfeit goods and corruption. Finally, cyber crime is an increasing concern, and attempts by the government to improve online security have largely been counter-...
Pakistan Labour Market
Pakistan Labour Market
BMI View: Investors in Pakistan are presented with considerable risks when it comes to the country's labour market. Years of neglect mean that the education system is failing, with low enrolment and attendance rates resulting in a lack of basic skills among the majority of the workforce. Despite the large working age population in the country, availability of labour is restricted due to a low level of female participation and poor general health reflected in the low life expectancy in Pakistan. These factors largely offset the potential benefits of a competitive minimum wage and flexible labour market conditions. Overall, Pakistan receives a score of 40.9 out of 100 for Labour Market Risk, which places the country 34th...
BMI View: Businesses operating in Pakistan will face considerable challenges when it comes to logistics. Although the country offers competitive electricity and fuel costs, interruptions to supply are frequent, which is a deterrent for heavy power users and Pakistan is facing a severe water shortage. The costs of importing and exporting are relatively low; however this benefit is offset by the long lead times caused by the weak internal transport infrastructure in Pakistan. While Pakistan does offer enormous growth potential, at present it does not have the infrastructure to match and as a result the country has a score of 47.6 out of 100 on the BMI Logistics Risk Index. This puts Pakistan in 19...
Pakistan Trade & Investment
Pakistan Trade & Investment
Trade and investment risks are very high in Pakistan owing to the country's high fiscal and trade barriers and the extent of red tape plaguing its bureaucracy. Compounded by the volatile domestic security situation, foreign investment outflow in recent years has slowed, a trend we expect to continue in the foreseeable future. That said, the country's developed banking system provides good access to international financial markets. For these reasons, the country has an overall score of 29.5 out of 100 for Trade and Investment, putting it in 24th position out of 30 countries in Asia.
Following a sharp rise in foreign direct investment (FDI) in Pakistan from the mid-1990s to the mid-2000s, since 2008 it has slowed significantly, and currently accounts for just 11.8% of Pakistan's total GDP. For the most part, inconsistent economic policies, high fiscal and trade barriers, high corporate tax rates and poor infrastructure are responsible for this...
Pakistan Industry Coverage (16)
BMI View: We take a cautious view of the prospects for the Pakistani agribusiness sector. There are numerous challenges facing producers of all commodities covered by this report, chief among them a dire security situation, erratic power supply, lack of availability of finance and vulnerability to extreme weather events. The sugar industry is the sub-sector we view as least promising due to its high production costs and poor relations between growers and processors. Nevertheless, the government has taken some positive steps to improve the availability of higher quality seeds for rice, wheat and corn which should raise yields in the medium term. Our expectation for rising prices out to 2020 also gives some grounds for optimism regarding the key export commodities of rice and cotton....
BMI View: We believe demand momentum for Pakistan's auto sector will remain strong in FY2015/16, and forecast vehicle sales to grow by 18.2%. The positive outlook is underpinned by favourable monetary conditions, which will help to lower credit costs for potential car buyers, while the government's taxi scheme will also continue to spur demand momentum over the coming quarters.
|Passenger Car and Light Commercial Vehicle Sales|
|f = BMI forecast. Source: PAMA, BMI|
Pakistan Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Pakistan Consumer Electronics
BMI View: We hold a positive outlook for the Pakistani consumer electronics market as a whole. We undertook significant revisions in our previous report update in Q415. This quarter we have left our forecasts unchanged. We believe that the mobile handset sub-sector will be the fastest growing with computer sales posting stable yet modest growth. We believe the weakest growth prospects are in the audio and visual sales category. Looking ahead, our Country Risk team's forecast for strong household income growth informs our outlook for robust consumer electronics spending growth from 2015-2019 as households acquire sufficient disposable income to enter the market for the first time. We now forecast total consumer electronics device spending will grow at a CAGR of 7.6% from 2015-...
Defence & Security
Pakistan Defence & Security
BMI View: We expect an escalation in domestic security threats though 2015 in response to the NATO withdrawal from Afghanistan, the ongoing military offensive in the Federally Administered Tribal Area (FATA), and rising tensions with Indian forces along the Jammu Kashmir border. The Pakistan Government has increased military spending, and is investing in indigenous defence companies. They in turn are looking to increase capacity through international partnership, creating opportunities for foreign players.
The security situation in Pakistan has steadily deteriorated through 2014. Last year witnessed regular terrorist attacks against military and civilian assets, including Karachi International Airport. This illustrates that domestic and international terror cells are well resourced and well trained, making them a credible threat to domestic and international organisations. Moreover, the NATO...
Food & Drink
Pakistan Food & Drink
BMI View: The consumer outlook for Pakistan will be supported by a very positive demographic profile. However, an uncertain political outlook casts a dark cloud over the economy, which may affect its ability to perform well over the coming years, and therefore informs our relatively weak annual real GDP growth forecast of 4.1% over the next decade. Although the consumer story has substantial potential, it could be weighed down significantly by a weak economic outlook. Per capita food consumption is forecast to experience strong growth - however, this will be from a low base, and consumption is likely to remain significantly lower than other key...
Pakistan Freight Transport
The freight mix in Pakistan is set to perform moderately in both the short and medium term, with growth constricted somewhat by the parlous state of many integral economies at present. Also, domestic strife, such as the road blockade in Punjab in August 2014, has had a detrimental effect on freight output and such scenarios could flare up again into 2015.
Export cargo worth USD600mn came to a standstill in August 2014 due to a road blockade in the province of Punjab, according to exporters and shipping line sources and reported by Business Recorder. The tussle between the Pakistani government and opposition political parties - Pakistan Tehreek-e-Insaf and Pakistan Awami Tehrik - has resulted in a virtual collapse to businesses, trade, social and exports activities in the province. This could have a significant detrimental impact on the Pakistan freight industry should further blockades take place going forward.
BMI View: Pakistan's construction sector continues to face major headwinds. Widespread corruption, lack of protection for property owners and limited government spending are all hampering growth, as is the worsening security situation which continues to deter potential foreign investors. The country's growth potential is substantial - transport, utilities and social/residential infrastructure are suffering from years of underinvestment and Pakistan's large labour pool and extensive natural resources mean that, should the investment environment improve, growth could be rapid. At present, however, this potential is unlikely to be realised and growth will remain subdued.
Forecasts and Latest Updates
Chinese President Xi Jinping has signed an...
BMI View : As of late 2015, the most recent reports from the insurance companies themselves indicate that trends are favourable across most sub-sectors of the non-life segment. The strong premiums growth of private sector life insurance companies through H115, suggest that the risks to our forecasts for that segment are very much to the upside.
Latest Updates And Forecasts
The leading players in both the non-life and the life segments of Pakistan's insurance sector are well- established and have the strengths to cope with a notoriously challenging business environment. In both segments, the players have achieved good growth in premiums and profits through H115.
Recent news indicates that non-life premiums should increase by 12% in 2015. We anticipate that premiums will rise by just under 10%...
Pakistan Medical Devices
BMI View: The Pakistan medical device market is small for a country its size.Domestic production is limited primarilytosteel surgical instruments and the majority of the market is supplied byimports.We are projecting a lower US dollar2014-2019CAGR growth rate of around 2%. The devaluation of the localcurrency against the US dollar will result in a comparatively lower growth rate during the forecast period.
|Total (USDmn)||Per Capita (USD)...|
Oil & Gas
Pakistan Oil & Gas
BMI View: While a string of recent exploration successes boosted Pakistan's oil and gas in the past few years, we forecast the country's reserves to continue declining over the next decade due to excessive use and lack of new significant discoveries. Nonetheless, recent discoveries and greater private sector involvement in the upstream sector pose an upside risk to our forecast and could stimulate much needed investment, thus helping the country temper or reverse the negative trend.
Pharmaceuticals & Healthcare
Pakistan Pharmaceuticals & Healthcare
BMI View: Healthcare access will remain limited by Pakistan's fragmented medical system. Effective improvements to this will require a consolidation of healthcare policy, as the devolution of responsibilities to provincial authorities have created uneven healthcare access while Pakistan's mixed medical delivery model sees overlapping services and wastage. However, such a move is unlikely given the lack of policy continuity in the country, thus demanding that pharmaceutical firms scope their strategies at the provincial level while accounting for the highly fragmented delivery of healthcare.
Headline Expenditure Projections
Pharmaceuticals: PKR231.23bn (USD2.29bn) in 2014 to PRK252.42bn (USD2.46bn) 2015; +9.2%in local currency terms and +7.3% in US dollar terms.
BMI View: A lack of generation capacity, insufficient investment, as well as fuel and water shortages have narrowed the supply/demand margin considerably, negatively impacting economic activity across Pakistan. Supply shortages will be a dominant theme clouding Pakistan's power sector over the near term. Over the medium- to long term, the incorporation of non-hydro renewables into the electricity mix, the surge in coal-fired power generation - and consequently the significant decline in oil-fired power generation - will be the key market dynamics.
Latest Updates And Structural Trends
Progress in the...
Pakistan Real Estate
BMI View: Pakistan's commercial real estate sector is underdeveloped, with long-term security problems and unstable politics having served to deter investment into the sector. Although we see this situation continuing, at least in the short term, in the long term there are significant opportunities as prices are low, meaning potential yields are high, and there is considerable room to expand and modernise Pakistan's stock of commercial real estate.
Improved regulations surrounding the creation of real estate investment trusts (REITs) could pave the way for increased investment via this format, and lead to more Pakistani investment being directed into the home market rather than overseas.
We forecast Pakistan's real GDP growth rate will be around 4.1% a year over our forecast period to 2018. The economy is held back by concerns over the security situation and political...
BMI View: BMI forecasts healthy growth at Pakistan's two major ports, both based around the largest city in the country, Karachi. Both the Port of Karachi and the Port of Muhammad Bin Qasim are set to post positive growth in 2016 and throughout the rest of our forecast in the medium term to 2019. While growth will plateau at steady rates at both ports, the Port of Muhammad Bin Qasim will see more robust growth than that of the Port of Karachi, particularly in terms of container throughput. We forecast that Pakistan will see comfortable macroeconomic growth over our short- and medium-term forecast period, and highlight that the country's efforts to diversify trade out of its current core trade partners could pay dividends to the shipping sector in particular in the long term.
Both Major Ports To See Growth In 2016...
BMI View: Warid's 4G LTE network is its most attractive asset and is the primary attraction for Mobilink as it prepares to take over Pakistan's smallest mobile network operator. Consolidation would put additional pressure on Telenor, but acquisitions are unlikely to feature in its competitive response.
The merger between VimpelCom-owned Mobilink and Abu Dhabi Group-owned Warid Telecom would shrink Pakistan's mobile market from five players to four and entrench Mobilink as the largest player. We believe the putative deal would not create an excessively powerful player and therefore expect there to be little regulatory or industry opposition on this front. Second-ranked Telenor Pakistan will see the distance between itself and the...